John Matonis has a new and excellent post on his ‘Monetary Future’ blog.

In it, he logically goes through some of the issues surrounding Bitcoin. It is well worth reading.

One section however, spurred this BLOGDIAL post. It’s the part about Vili Lehdonvirta’s ideas on ‘virtual goods’…

[…]

I am worried that Bitcoin is a step too far as it leaves no possibility for even democratic governments to enforce their laws. This is a topic I would love to debate with the community and hear opposing views. I think the end result could be a better understanding for me, but also a better understanding for the Bitcoin community on how to live in harmony with democratic authority.

Absolutely astonishing. A ‘step too far’? Towards or away from what exactly? We do not want to live in harmony with democratic authority. Democratic authority, to us, is inherently illegitimate, evil, immoral and completely unjustifiable. There are people who are attracted to Bitcoin precisely because it is beyond the control of ‘democratic authority’. As for it being a step too far, we must bear in mind that no one is forcing anyone to use Bitcoin. You decide on your own to use it, and if it succeeds or fails, you take the benefit or profit or losses respectively. Violent Statists are of course, vehemently opposed to free trade, voluntary exchange and liberty. Bitcoin is to the Statist as sunrise is to Dracula.

Matonis chimes in with…

For the most part, I respect Vili Lehdonvirta’s academic work on virtual goods ownership, but he harbors confused thoughts on the broader acceptance of bitcoin through dilution of its most beneficial properties, because he mistakenly extends the notion of virtual goods legal recognition to virtual currency legal recognition.

Fascinating. The Statists from the legal profession class are described by Murray Rothbard in ‘For a New Liberty’ as follows:

We see clearly why the State needs the intellectuals; but why do the intellectuals need the State? Put simply, the intellectual’s livelihood in the free market is generally none too secure; for the intellectual, like everyone else on the market, must depend on the values and choices of the masses of his fellow men, and it is characteristic of these masses that they are generally uninterested in intellectual concerns. The State, on the other hand, is willing to offer the intellectuals a warm, secure, and permanent berth in its apparatus, a secure income, and the panoply of prestige.

[…] since the early origins of the State, its rulers have always turned, as a necessary bolster to their rule, to an alliance with society’s class of intellectuals. The masses do not create their own abstract ideas, or indeed think through these ideas independently; they follow passively the ideas adopted and promulgated by the body of intellectuals, who become the effective “opinion moulders” in society. And since it is precisely a moulding of opinion on behalf of the rulers that the State almost desperately needs, this forms a firm basis for the age-old alliance of the intellectuals and the ruling classes of the State. The alliance is based on a quid pro quo: on the one hand, the intellectuals spread among the masses the idea that the State and its rulers are wise, good, sometimes divine, and at the very least inevitable and better than any conceivable alternatives. In return for this panoply of ideology, the State incorporates the intellectuals as part of the ruling elite, granting them power, status, prestige, and material security. Furthermore, intellectuals are needed to staff the bureaucracy and to “plan” the economy and society.

[…]

In all societies, public opinion is determined by the intellectual classes, the opinion moulders of society. For most people neither originate nor disseminate ideas and concepts; on the contrary, they tend to adopt those ideas promulgated by the professional intellectual classes, the professional dealers in ideas. Now, throughout history, as we shall see further below, despots and ruling elites of States have had far more need of the services of intellectuals than have peaceful citizens in a free society.

[…]

For States have always needed opinion-moulding intellectuals to con the public into believing that its rule is wise, good, and inevitable; into believing that the “emperor has clothes.” Until the modern world, such intellectuals were inevitably churchmen (or witch doctors), the guardians of religion. It was a cozy alliance, this age-old partnership between Church and State; the Church informed its deluded charges that the king ruled by divine command and therefore must be obeyed; in return, the king funneled numerous tax revenues into the coffers of the Church. Hence, the great importance for the libertarian classical liberals of their success at separating Church and State.

For a New Liberty

The whole idea of ‘Digital Goods’ is a fallacy, created by Statist professionals in order to gain a foothold in the emerging digital economy that threatens to disrupt their authority and completely replace the old world economy in many areas, specifically the delivery of films, books and music, and now through Bitcoin, the process of moving money around the globe.

The fallacious notion of ‘Digital Goods’ is pyramided on the idea that copyright (an artificial concept of the State) is legitimate and logical. As is the case with copyright, the idea of Digital Goods conflates the correct idea of property rights in real-world physical goods with a false right in intangible pure information, which can be infinitely copied, transmitted and transformed without loss.

An idea can have a human originator, but once that idea is conveyed to another man, it resides in the mind of that man. The only way that you can prevent that second man, the receiver, from using this idea is to initiate force against him. On this basis alone copyright as a legitimate idea falls, since it violates the non aggression axiom. I will leave it to you to explore the rest of this idea at your leisure. I also strongly recommend that you read ‘Against Intellectual Monopoly‘.

Bitcoin is an extraordinary and important innovation. It is the first system where a ‘Digital Good’ cannot be double spent. That means Bitcoins can be duplicated perfectly an infinite number of times, but they cannot be spent more than one transaction at a time between two people.

Bitcoins retain all the qualities of information (near zero cost transmission, infinite transformability, infinite lossless replicability), but the Bitcoin ecosystem changes them into something that has some of the qualities of physical property, whilst retaining all of the advantages of pure information. You can actually own a Bitcoin secure in the knowledge that even though everyone can read your Bitcoin, make copies of it, and see it in the Block Chain, they cannot steal it from you and spend it. You can copy Bitcoins ad infinitum, but inside the system is the only place where they have value or more accurately, utility. Bitcoin is the first instance of a digital representation that has some of the scarcity properties of a physical good.

Interestingly, this idea if transposed onto a music file, picture or film, could not work to prevent people using (double spending) those things, because there is no inherent value in owning a digital copy of a music file, film or book.

Imagine that instead of digital signatures, the Bitcoin block chain was used to control signed MP3 files. You could then have an ecosystem where unique copies of tracks (unique in that they were digitally signed, could not be forged and ownership was verifiable) could circulate for payment. The problem with this is that in this scenario music has two uses, one when it is stored in a file, and another when it is played in a music player, as well as being a string of numbers stored somewhere. There is also the ‘problem’ of the intent of music creators being that the same music is available to many people all at once.

Bitcoins do not have any use other than to confirm that they are owned by someone. This is why they can be used to transmit money over the internet. A digression, but interesting nonetheless, because this is the sort of thinking the large media companies should be doing or paying to have done for them, if they want to survive in any form over the next decade.

Apart from the revolutionary and singular case of Bitcoin in the Bitcoin ecosystem, all digital representations of ideas have zero intrinsic value, because they can be copied at a cost that approaches zero. In fact, the more copies there are, the lower the cost of obtaining a copy becomes because there are more storage locations to get them from and the cost of your time to search for them decreases. On some level, the law industry understands this, as they put pressure on Google to remove search results that point to files they claim contain ‘intellectual property’ belonging to their clients.

Digital technology has changed the way the world handles information forever. Trying to superimpose the outmoded, ridiculous and erroneous 19th century ways of thinking about property and business on people living today is a fruitless and anti-human endeavour. What’s more, it does not make everyone more honest and make business more efficient. Look at the dispute resolution mechanisms in eBay and Amazon, and you get a glimpse of how the free market works to protect everyone and benefit everyone. The State does not poke its snotty nose into the dispute resolution systems of these online services and the vast majority of transactions happen without any problems, and where there are problems, they are resolved within the mechanisms of the services to everyone’s satisfaction.

Just as the buggy whip makers, the lake ice industry and all superseded industries were eliminated by progress, the notion that music, books and any work that can be digitised should remain scarce, by force, is an astonishingly evil idea. The difference in people today as compared to those living in the age of the horse and cart it seems, is that this generation of men is not sufficiently agile, and a subset of them is unwilling to pivot and change business models to deal with the new reality. This is probably due to the very rapid pace of change, and the fact that there appears to be no future whatsoever for the people in the business of hoarding and supplying scarce information distributed in physical containers. They are squeezing this model for every drop of blood they can get before it becomes untenable to ask for money in exchange for physical discs or files.

Ill informed and self interested cronies and Statists are trying to keep man in horses and carts when the internal combustion engine car is in the garage of every home. It simply doesn’t make any sense on any level, is immoral, and the only reason why they can get away with it is they have an agent with the monopoly of violence to back them up: the State. In absentia of this force, no one would listen to the Statists, the MPAA/RIAA, the luddites, the lawyers, the buggy whip manufacturers and the Statists. Since they offer nothing of value, they would simply be ignored.

I predict that there will come a time when none of these people are taken seriously, and they are ignored and sidelined. The world simply will not be held down to the level of Stone Age Man to suit the needs of a vanishingly small number of venal, violent and ignorant men and their blinkered apologists. The dispute resolution systems that are an emergent property of sites like Amazon and eBay will spread out into the real world, making the State and its proponents redundant. It would be a fascinating project to try and separate these arbitration services and generalise them so that the public could use them instead of the courts of the State.

The fact of the matter is that lawyers have no right to tell anyone how to voluntarily exchange goods and under what terms those goods are to be exchanged. Their role is to arbitrate in disputes where both parties agree to be subject to the rules of the arbitrator, and nothing more. Because the vast majority of humans can exchange without disputes, they must create conflict in this area to maintain their social status and incomes, with the help of the State. This is why lawyers support the fallacious idea of copyright, and why they want to extend this sickness to Bitcoin, and all areas online.

The Statists refuse to accept reality, or cannot understand it, or understand it and actively fight to control it with violence. Lawyers especially have the most to gain from keeping the immoral, illogical and absurd copyright laws in force.

Or do they?

The fact of the matter is that once copyright laws are removed from all statute books, the amount of work for lawyers will not decrease, but will in fact increase, as creative people adapt to the new business models.

For example, no one has the right to steal a physical disk from anyone. If a musical work is created and stored in a fixed medium, and the right to be the first to sell it is sold to someone, a person who steals that disc and releases what is stored on it could be held liable for the damage caused to both contracting parties.

A disc of an unreleased highly anticipated pre-sold masterpiece would have an agreed value that is set out in a contract, and a value in pre-sales. Once it is leaked by theft and no one will pay for it, losses have been imposed upon the creative party, since exclusivity has been broken by the thief. In this scenario, damages are not calculated by how many copies are in the wild but by the fact that a physical disc has been stolen, its contents leaked and sales potential has been destroyed through cancellations. This is of course, completely separate from a work that is released on a disc, sold to a person, and that person making a copy for whatever reason. This is entirely legitimate, for reasons laid out clearly in Against Intellectual Monopoly.

This scenario is the same as someone breaking into a jewellery store and stealing a diamond necklace. Once that necklace has been stolen, it cannot be sold to someone else. The scenario of a pre-release disc being stolen and released is even worse, because the irreplaceable, unique first use opportunity has been destroyed forever. This is the true nature of the damage and theft done to both parties by this sort of act; the value of such a theft can be estimated and a valid moral claim made against a thief. Once again, this has nothing to do with the subsequent copies made by people who got a hold of the data by whatever means.

I use the example of the theft of a necklace deliberately, because it is used by the copyright monopoly to justify everyone being forbidden from making copies of what they own. Note how I am separating the act of copying what you have legitimately purchased from the destruction of potential by an unauthorised pre-release of a stolen disc.

There are many other circumstances where fault can be placed in this scenario. For example, if one party fails to maintain security and this is the cause of the leak, someone is at fault and has to pay. This can be laid out explicitly in a contract. These byzantine details are the job of lawyers to sort out, set terms for and organise. It is for lawyers to define these agreements, fix the agreed penalties, pursue the wrong doers in case of a breach of information. This would be a huge amount of complex work, worth an enormous amount of money. Lawyers are major beneficiaries of a world without copyright.

Of course, once a suite of music or book or other information is released, it can be copied ad infinitum, but then the next thrill is the thing that is valuable, and the public has an insatiable appetite for the new; this is just one possible model for the creative to explore, and of course, since they are the creative, its up to them to think of new ways of approaching the market in a reality where every idea can be copied and can spread world-wide in a matter of hours, if you hit exactly the right note.

The ignorant, imagination-less Statists want to prevent this astonishing world of the super abundance business model from fully emerging. They are doing everything they can to wreck the exponential growth of tools, contracts and technology that will unarguably benefit the entire planet, for the sake of a handful of ignorant, comfortable, computer illiterates.

Unfortunately for them, the harder they push against the internet, the stronger it becomes. Every service they have tried to cripple has either resulted in that service strengthening or spawning new services. Bulletin Board Systems, IRC DCC channels, Napster, Gnutella, Bittorrent are all examples in chronological order of how software outpaces the luddites, and of course, that list excludes the peripheral discoveries like MP3 that fuel the creation of new services.

This is a battle that they cannot win and which they should not win, because they have no case or moral foundation whatsoever.

Read this article in Hungarian.

This entry was posted on Saturday, November 26th, 2011 at 8:24 pm and is filed under Bitcoin, Economics, Libertarianism, Money, Post Tipping Point, Software, The Facts.